Dollar Rebound Fades as Market Eyes BoE, BoJ Decisions

The US dollar declined across the board on Wednesday after the Federal Reserve's (Fed) decision to keep interest rates steady. Despite some hawkish undertones, the greenback rebounded on Thursday due to rising tensions in the Middle East.

Markets assigned a 75% probability of a rate hike in September, with the remaining 25% indicating no action. However, a second, same-sized hike remained fully factored in for March 2027.

The Bank of England (BoE) and the Bank of Japan (BoJ) took center stage on Thursday, with investors eyeing their decisions to gauge interest rate movements. The BoE is expected to keep rates untouched again, but rising inflationary pressures may prompt policymakers to dissent from the decision.

The yen barely benefited from a potential hawkish message from the BoJ, as investors remain skeptical about the central bank's ability to become more hawkish. Meanwhile, Wall Street traders are focused on earnings results from tech giants Microsoft and Meta, among others.